In a December 20, 2012 announcement, commodities exchange powerhouse IntercontinentalExchange Inc (NYSE:ICE) announced its formal intention to purchase New York Stock Exchange operator NYSE Euronext (NYSE:NYX) for approximately $8.2 billion. The complicated cash-and-stock deal offer provides current NYSE shareholders with three distinct options. Each option values NYSE EuroNext at about $33.12 per share. Although such a high-profile merger will certainly attract regulatory scrutiny, it appears that this deal has a good chance of closing by the end of the fourth quarter of 2013.
About IntercontinentalExchange Inc (NYSE:ICE) and NYSE EuroNext
Atlanta-based IntercontinentalExchange is one of the world's largest commodities exchanges by volume. Unlike that of its CME Group Inc (NASDAQ:CME) rival, ICE's focus lies in the energy sector. The company operates a commodities exchange and clearinghouse as well as an over-the-counter division that facilitates the sale of low-liquidity commodities. It also provides comprehensive risk-management and market-data services for traders and companies that wish to assess the potential profitability of complex energy-related investments. Finally, ICE operates a futures exchange that has proven wildly successful with the advent of global high-speed trading. In 2011, the company earned about $549 million on $1.37 billion in gross revenues.
New York-based NYSE EuroNext is known for its signature Wall Street property. As the operator of the most prestigious stock exchange in the United States, the company enjoys tremendous visibility. NYSE EuroNext also operates the American Stock Exchange in New York and several properties in Europe, including the Amsterdam, Paris, Brussels and Lisbon stock exchanges. Its additional properties include a European derivatives clearinghouse and transaction-settlement service that processes real-time trades across its network. Like ICE, NYSE EuroNext conducts a significant amount of market research and serves as one of North America's largest sources of market data. In 2011, the company earned $431 million on $3.6 billion in gross revenues.
How the Deal Is Structured
The ICE-NYSE EuroNext merger's structure is somewhat novel. Under the terms of the deal, NYSE EuroNext shareholders will be given three options. First, they may opt to exchange their NYSE positions for cash consideration of $33.12 per share. Second, they may elect to receive 2.581 ICE shares for every 10 NYSE EuroNext shares that they own. Alternatively, they may choose to receive a "combination package" that includes cash consideration in the amount of $11.27 as well as 1.703 ICE shares for every 10 NYSE EuroNext shares that they own.
These three options are circumscribed by the limitations that ICE's board of directors has placed on its commitment to the deal. Specifically, the company is unwilling to commit more than $2.7 billion in cash and 42.5 million shares to the deal. Collectively, these limits place a cap of $8.2 billion on the deal's current value. Should ICE's value fall considerably from its current levels, NYSE shareholders who opt to accept the company's shares may see smaller returns from the merger.